- EUR/JPY has lost some momentum, currently sitting around 164.40 during early European trading on Wednesday.
- The outlook for this currency pair remains positive as it stays above the significant 100-day EMA, with bullish readings on the RSI.
- The first resistance level to note is at 165.00, while initial support can be observed at 163.51.
The EUR/JPY pair appears to be drawing some selling interest around the 164.40 mark as the early European session unfolds. The Japanese Yen has gained strength against the Euro, reflecting the Bank of Japan’s (BOJ) indications of further policy tightening. Later today, the market is set to focus on the German HICP data for April consumer prices.
From a technical perspective, the favorable trajectory for EUR/JPY persists, buoyed by its position above the crucial 100-day exponential moving average (EMA) on the daily chart. The upward trend is also reinforced by the 14-day RSI, hovering above the midline at around 58.30, indicating a positive momentum in recent trends.
Looking ahead, a key resistance level is identified at 165.00, which serves as both an upper boundary and a psychological marker within the Bollinger bands. If the pair manages to decisively break through this resistance, it could gain additional momentum and potentially target the 166.00 mark reached on November 7, 2024. Further up, another level to consider will be 166.60, noted for October 30, 2024.
On the downside, the support level at 163.51, established on May 12, serves as an initial threshold for EUR/JPY. If this level is breached, the pair could see a decline towards the 100-day EMA set at 161.80. Additionally, the psychological barrier of 160.00 is another noteworthy level to monitor.
EUR/JPY Daily Chart
Questions About the Japanese Yen
As one of the most frequently traded currencies globally, the value of the Japanese Yen (JPY) is largely influenced by the Japanese economy’s performance and the Bank of Japan’s policies, along with factors like bond yield differences between Japan and the US, among other considerations.
The BOJ is tasked with currency control, which significantly affects the yen’s movement. While it has intervened in the currency market to lower the yen’s value, such actions are infrequent due to political pressures from major trading partners. The BOJ’s ultra-loose monetary policy from 2013 to 2024 led to increased policy discrepancies with other central banks, resulting in a depreciation of the yen against other major currencies. Recently, however, there have been signs of support for the yen as this ultra-loose policy gradually starts to wind down.
In the last decade, the BOJ’s commitment to ultra-loose monetary policy has created significant policy differences with other central banks, especially the US Federal Reserve. This divergence led to a widening gap between US and Japanese bond yields in 2010 and contributed to the dollar’s strength against the yen. The BOJ’s decisions in 2024, in conjunction with interest rate cuts from other major central banks, appear to be starting to close this gap.
The Japanese yen is often viewed as a safe-haven currency. Consequently, during times of market volatility, investors tend to flock to the yen for its stability and reliability, which could bolster its value against currencies perceived as riskier.
